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After the memorandums

By Alexis Papachelas

Everyone in Europe knows there can be no new memorandum in Greece. It would be politically unsustainable and it might not even be necessary after all. The latter will be determined by whether the economy fares better than predicted and by bank recapitalization. The economy’s well-being will be largely affected by the tourism sector, where predictions are excellent this year. If these are verified they will be beneficial to state revenues and the country’s financing needs will be lower. Bank recapitalization through private funds appears to be on the right track too. Foreign investor interest in Eurobank demonstrated that the current climate is favorable for raising capital in Greece. This means that an extra 11 billion euros tucked away in case a local lender needs to resort to the Hellenic Financial Stability Fund might remain intact and eventually be used for state expenditure.

This is based on the optimistic scenario that there will no need for extra EU funding – in other words, European parliaments approving new funds and so on. But even if fresh funding is required, it will not resemble the events of the last four years. Northern Europeans in particular wish to see countries in bailout programs pass the test. Sometime this summer PM Antonis Samaras will be able to follow in the footsteps of Ireland and, shortly, Portugal and officially announce the end of the memorandums.

One issue still pending is what kind of inspections there will be. One scenario calls for Europe providing the rest of the money pledged by the IMF up to 2016 – Berlin and Brussels are aware of the fact that Greece’s relationship with the IMF has soured. Of course the IMF will monitor Greek developments through a discreet Athens presence. Another scenario is a new form of control, with inspectors visiting bi-annually to verify that there is no fiscal relaxation and that approved reforms are not being dismantled through amendments and so on. This scenario – the minimum of control demanded by Greece’s lenders – will most likely see a different set of officials representing the IMF, European Central Bank and European Commission, as a means of emphasizing that times have changed. Ideas abound and are being discussed behind closed doors. Those handling Greece believe structural changes are needed to attract entrepreneurship and investment. One idea is the creation of a fund to strengthen development initiatives with extra, pre-agreed funding released when the country implements certain structural changes.

Decisions are expected to be finalized in September, when a new Greek deal will also include debt relief. In the meantime, the European Parliament elections may change plenty or nothing on the country’s political scene.

ekathimerini.com , Monday April 28, 2014 (16:26)  
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